Taiwan-based container line Yang Ming unfairly exploited its customers by systematically failing to meet its service commitments in order to take advantage of higher shipping rates during the COVID-19 pandemic, according to now-bankrupt retailer Bed Bath & Beyond (BBB). The complaint against Yang Ming with the Federal Maritime Commission (FMC), seeking at least $7.7 million in damages, was formally acknowledged by the FMC September 15.
“This profiteering was particularly damaging to Complainant (BBB), which was forced to file a Chapter 11 bankruptcy petition on April 23, 2023,” the complaint states.
The action would push BBB’s total legal claims against ocean carriers above the $50 million mark because of two other known disputes with OOCL and Mediterranean Shipping Co.— and there might be more to come, says Yahoo Finance, as BBB also had contracts during the pandemic with Cosco, Evergreen, HMM and Wan Hai.
“The COVID-19 pandemic caused unprecedented challenges to trade and the global economy. During these difficult times…Yang Ming took advantage of price inflation in the container shipping sector and unfairly exploited its customers,” the complaint goes on. “Consequently, Yang Ming’s profits surged considerably, while shippers and the broader public in the U.S. had to shoulder the increased freight costs in the form of cost increases and inflation.”
BBB claims Yang Ming violated the Shipping Act of 1984 by failing to allocate space as agreed upon and, instead, allocating space to shippers willing to pay higher freight prices. The retailer also claims Yang Ming made whatever service it did offer conditional on payment of extra-contractual prices and surcharges, such as peak season surcharges throughout more than 90% of the service contract period, prior to full performance of its service commitments.
BBB also alleges an unreasonable assessment of demurrage and detention charges during periods of congestion and shortages of equipment at ports; and a refusal to “deal” unless an amendment reducing the minimum quantity commitments under the service contract was agreed to.
Yang Ming’s response has been to seek to avoid commitments under its contracts with BBB. “Astonishingly,” the complaint to the FMC states, “Yang Ming has taken the position that its own Service Contract is illusory, and that Yang Ming is not subject to any service commitment whatsoever.”
The complaint also says that Yang Ming filied a retaliatory declaratory judgment complaint in the U.S. District Court for the Southern District of New York in April, 2023, “seeking a declaration that Yang Ming’s Service Contract permits Yang Ming to breach its service commitment at will, and that Complainant has no recourse whatsoever. That action is now automatically stayed as a result of Complainant’s bankruptcy.”
All top ten ocean container carriers have been accused of systematic price-gouging and unfair practices during the pandemic in complaints to the FMC by shippers in the past two years. Most of those cases have settled for undisclosed sums.
Read more: Flurry of FMC Complaints Reveals Widespread Accusations of Ocean Carrier Profiteering
President Joe Biden raised the issue of high profits among ocean container companies during his 2022 State of the Union address, announcing “a crackdown on those companies overcharging American businesses and consumers.”
The Ocean Shipping Reform Act of 2022 (Public Law 117-146) was intended to empower the FMC to more proactively and effectively regulate the ocean shipping industry. However, current law does not allow the FMC to enforce federal anti-trust laws against foreign-owned ocean carriers — which covers all major ones.
In March 2023, Democratic California Congressman Jim Costa re-introduced the bipartisan “Ocean Shipping Antitrust Act.” The legislation is co-sponsored by Republican U.S. Representative Dusty Johnson, and Democratic Representatives John Garamendi, Josh Harder, and Jimmy Panetta. A statement from Costa said the proposed legislation would untie the hands of federal regulators – the U.S. Department of Justice, Federal Trade Commission, and FMC – to address “collusion and anti-competitive business practices that are illegal for any other transportation sector.”
Yang Ming was accused of price-gouging and other illegal practices in a 2022 complaint to the FMC by Achim Importing Company Inc., an importer of home furnishings. That complaint alleged that, instead of honoring the pricing and minimum quantity commitments in its service contract, Yang Ming began a practice of “systematically favoring other shippers, including spot market purchasers willing to pay high rates.” As a result, Achim said, it had to obtain space on the spot market at enormous expense. That case was settled in August 2022.
Bed Bath & Beyond filed a complaint against Orient Overseas Container Line (OOCL) with the FMC April 27, 2023, just days after declaring bankruptcy, stating that the ocean carrier participated in “brazen price gouging and profiteering” business practices that wound up costing the retailer $31.7 million in extra freight charges, additional costs and lost profits.
The BBB/Yang Ming proceeding has been assigned to the Office of Administrative Law Judges, with an initial decision of the presiding judge to be issued by September 12, 2024. The final decision of the FMC shall be issued by March 27, 2025.
The full text of the complaint can be found in the FMC’s electronic Reading Room at https://www2.fmc.gov/readingroom/proceeding/23-10/
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- Source: https://www.supplychainbrain.com/articles/38129-yang-ming-accused-of-profiteering-during-pandemic-by-bed-bath-and-beyond
